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Medicare ACOs Reduce Healthcare Spending On Complex Patients

Medicare ACOs reduced healthcare spending by $136 per beneficiary and $456 per medically complex beneficiary annually, according to a recent study.

July 19, 2016 - While one of the primary goals of joining an accountable care organization (ACO) is to coordinate care in effort to reduce healthcare spending, many Medicare ACO participants have seen early benefits from the alternative payment model.

According to a recent study in the JAMA Internal Medicine, Medicare ACOs saved about $136 per patient annually. Although, Medicare ACOs experienced more success with reducing healthcare costs associated with clinically vulnerable patients, resulting in $456 in healthcare savings per patient annually.

“What we’re finding is that reductions in total spending associated with ACOs are modest, increase slightly over time, and demonstrate savings consistent with other evaluations of ACO impact,” said Carrie Colla, PhD, lead author of the study, in a press release.

“With Medicare ACOs, the majority of the savings is concentrated on patients with complex medical needs, indicating that coordinated care is likely a factor in being able to more efficiently treat chronic illness.”

Dig Deeper

Using Medicare claims data from 2009 to 2013, the study revealed that Medicare ACOs experienced slight reductions in healthcare spending for the first two years after ACO implementation, especially with clinically vulnerable patients, who were treated for three or more conditions.

Despite only accounting for 22 percent of Medicare beneficiaries, healthcare providers spent about 114 percent more on clinically vulnerable patients than on Medicare beneficiaries overall. Before ACO implementation, medically complex patients were responsible for about 82 percent of overall spending.

After ACO implementation, researchers found moderate increases in healthcare savings associated with the Pioneer program and Medicare Shared Savings Program (MSSP) ACOs. These ACOs were able to decrease overall spending by $34, or 1.3 percent, per-beneficiary, per-quarter.

Across all ACOs, providers were able to more significantly reduce healthcare spending on the clinically vulnerable group, resulting in $114, or two percent, in savings per-beneficiary, per-quarter.

Researchers also found that total savings achieved by each ACO program were not statistically different from each other, indicating that these Medicare ACOs were able to similarly coordinate care and reduce costs.

The study attributed the slight decreases in healthcare spending to better management of acute care spending and high-cost institutional use.

Providers in Medicare ACOs reduced acute care spending by $12, or 1.4 percent, overall, and by $48, or 2.3 percent, for the clinically vulnerable group. The providers also spent five percent less on skilled nursing facilities services in both the general patient and the clinically vulnerable populations.

Additionally, the Medicare ACOs further reduced healthcare spending by preventing some expensive healthcare events for the overall patient population. The ACOs achieved a 1.4 percent decrease in hospitalizations and a 1.9 percent decrease in emergency department visits among all beneficiaries.

While the Medicare ACOs demonstrated slight decreases in healthcare spending overall, the study found that the magnitude in spending reductions decreased over time across all ACOs.

Researchers explained that the larger decreases in spending when first joining the ACO may actually lower the benchmark spending values for ACOs, making it more challenging for Medicare ACOs to earn shared savings. The participants were not able to sustain the reductions in healthcare spending and many experienced slight increases in spending over time, stated the study.

However, the report concluded that the ACO model has had some early successes with reducing healthcare spending and high-cost institutional use for medically complex patients. According to the report, about 84 percent of the ACOs who achieved significant decreases in total spending earned shared savings from CMS in the 2012 and 2013 performance year.

Although the JAMA Internal Medicine study found some early benefits of ACO participation, a report from the Leavitt Partners in April revealed that most ACOs were not “performing meaningful well.”

The report explained that only 26 percent of ACOs in the MSSP earned shared savings, but these savings were highly concentrated among a handful of ACOs. The top ten ACOs who earned shared savings received almost one-third of all the savings earned by the 333 ACOs.

Leavitt Partners stated that the shift to value-based care, especially through ACO success, would take more time as providers make more “practice-related adjustments over a generation.” However, the study explained that negative or ambiguous results could discourage providers from joining the MSSP and incentivize participants to leave.